When the money machine blows up

Gordon Brown struggles to keep his footing as another crisis erupts

TONY BLAIR, after years as Britain's prime minister, remarked recently that religion and politics don't mix: a leader who invokes his faith is, he lamented, considered a “nutter”. For his successor, Gordon Brown, reconciling politics and God must seem a breeze compared with reconciling politics and money. Less than two months after the police dropped investigations into whether parties had offered peerages in exchange for loans, another money scandal is gripping Westminster.

The latest is a labyrinthine affair, and potentially devastating for Mr Brown. Since 2003 David Abrahams, a property developer from the north-east, has donated a total of over £650,000 ($1.3m) to the Labour Party through intermediaries including two employees, the wife of another and his solicitor. He claims to have done this to protect his privacy but, under the tighter rules introduced by this government, making donations in someone else's name is unlawful. On November 26th Peter Watt, the general secretary of the Labour Party, admitted that he knew about the arrangement, and resigned. Mr Brown, who claims not to have known, has promised to return the money.

Unfortunately for Labour, the mess does not stop there. On November 27th it emerged that Jon Mendelsohn, the party's chief fundraiser and recruited in September by Mr Brown himself, knew of Mr Abrahams's indirect donations too, although he was unhappy about them.

Questions have also arisen about contributions during the contest for Labour's deputy leadership last summer. Janet Kidd, Mr Abrahams's secretary, gave £5,000 to Hilary Benn, one of the candidates, who returned it after being tipped off that Mr Abrahams was the real source of the money. Mr Benn then took the same sum from Mr Abrahams directly. But Harriet Harman, the winning candidate, did accept a £5,000 donation from Ms Kidd, apparently without realising its true provenance. The spectacle of a donor giving money to different candidates under different names is odd enough; many wonder how Ms Harman could not have known what Mr Benn knew. The question is acute as she is married to Labour's treasurer, Jack Dromey, who says that he too was out of the loop. She is returning the money but Mr Brown's support for her has so far been nuanced.

Others are being dragged in too. In 2006 the Highways Agency lifted its block on a planning application for a new commercial centre in the north-east to be built by associates of Mr Abrahams. The government denies that ministers played any role in the decision, but promises to investigate the matter.

Party-finance rows are not confined to the Labour Party: the Conservatives received more money in undeclared loans before the last general election than Labour did, and the Liberal Democrats took money from a convicted perjurer. Indeed, it is due in part to Labour's efforts to make the system more transparent that chicanery is now evident. But whatever the context, a law has been broken. The Electoral Commission is investigating further and has consulted the Crown Prosecution Service. A police investigation may follow.

The funding fiasco has hit a prime minister who was already short of political capital. Mr Brown's honeymoon with the electorate was at its dreamiest during the Labour Party conference in September. Since then he has endured the botched handling of a possible snap election, the messy rescue of Northern Rock, a mortgage lender, and the loss by the customs and revenue office of 25m people's personal data. His reputation for competence has suffered horribly; he cannot now afford to lose his reputation for probity.

A Major legacy

Mr Brown is often likened to William Gladstone for his intellect and compares himself to Margaret Thatcher as a conviction politician. The analogy that commentators now draw with Sir John Major, the most recent Tory prime minister, will hurt. Mr Brown's premiership is not yet doomed, as Sir John's was, to be a fire-fighting postscript to that of a more illustrious predecessor. Sir John suffered a steady trickle of bad news over several years; Mr Brown has had a concentrated deluge of disasters, and the weather may improve as suddenly as it worsened. Unlike Sir John, he leads a stable government with a comfortable majority in Parliament. And whereas Sir John's opposition turned his woes into unassailable poll leads, the Tories have not yet definitively raced over the horizon.

Yet in other ways Mr Brown's fate may be worse than Sir John's. The latter at least won an election (and by a good margin in the popular vote, though not in parliamentary seats). Ever fewer pundits believe Mr Brown will do the same. And Sir John left a tangible legacy. The economic expansion that continues to this day began under him, as did the fall in crime. He introduced market reforms into the public sector, and even his policy towards the European Union (remaining outside the euro but sufficiently involved to push for eastward expansion) has been broadly vindicated.

By contrast, it is hard to know how Britain will be different after Mr Brown's time in office, though this is partly because he has already served a decade as chancellor of the exchequer. He harbours a few big ideas, such as extending the school-leaving age to 18, but seems disappointingly keen on diluting Mr Blair's promising public-service reforms. A sense of direction enables governments to stay on their feet when times are tough. Mr Brown must acquire one if his premiership is to recover.